May 17, 2012 -- Barclays Capital’s Asia IT analyst Jones Ku shares details of China's State Council’s RMB26.5 billion (about US$4.2 billion) subsidy program for household electrical appliances. The program sets aside RMB2.2 billion to promote consumption of light-emitting diodes (LEDs) and “other energy-saving light bulbs.”
The program will be in effect for one year. In addition to LED lighting, it covers energy-efficient vehicles, air conditioners, flat-panel display (FPD) television sets, refrigerators, and more.
There is currently no announcement on when the program will start, though Barclays expects it to be implemented in late June or early July. Ku says it is likely to be similar to the subsidies for energy-saving products that were trialed in Beijing from September 2011-February 2012 (10% of the selling price, with a cap of RMB400), but with the focus expanded to include more cities.
The LED lighting product subsidy has been rumored since November 2011, when China laid out its plans to phase out incandescent bulbs within 5 years. Expectations on the subsidy amount lowered over time (some early estimates were as high as RMB8 billion). The $348M LED subsidy sum discussed may be less than anticipated, though with no details on the per-product subsidies or the format of the cash deployment, estimating the likely impact to China LED demand is difficult. Certain municipal governments may match the subsidies of the central government, lowering the product cost further, Barclays noted in an earlier subsidy assessment.
Barclays looks at a scenario wherein the government subsidizes ~50% of LED bulb cost (similar to the programs deployed on the CFL bulb side several years ago). Assuming an average pre-subsidy price per LED bulb of ~$10, and assuming China accounts for ~20% of the worldwide bulb market, this subsidy would translate to ~69M bulbs or ~4% of China's bulb demand.
For more information, see Barclays Capital’s report, "U.S. Display & Lighting: Lightfair Highlights Positive End Demand Trends, But Continued ASP Pressure" https://?live.barcap.com/go/publications/content?contentPubID=FC1821997)
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